By JORDAN WEISSMANN

This week, an obscure Canadian medical marijuana producer named Tilray became the mostgabbed about stock on Wall Street, after a surreal, whiplash-inducing run of trading that at one point saw the company’s market value rocket past $20 billion. Even after giving up some of its gains Thursday, Tilray is currently worth more than major corporations like Chipotle, eTrade, or Macy’s.

Cue the jokes about reefer madness. Cannabis stocks have been, um, ripping higher this year as investors have tried to capitalize on America’s move toward legalization. Many market watchers are suggesting that we’re already in the middle of a marijuana bubble, while drawing comparisons to the fever for crypto currencies like Bitcoin. And after its bizarre ride this week, Tilray is the new face of the craze.

Marijuana remains banned under U.S. federal law. And while Canada has long permitted cannabis use for medical purposes, recreational sales won’t be legal until this October. Nonetheless, hundreds of small companies in the weed business have gone public over the years, generally trading as over-the-counter penny stocks or on Canada’s smaller exchanges, which have taken a relaxed attitude around any legal issues that might arise around them. This year, however, a handful Canadian marijuana firms have debuted on major American exchanges, exposing them to a much wider range of investors. The companies have been allowed to list because—unlike their peers selling purple kush in California and Colorado—their operations don’t break any drug laws. Tilray made its initial public offering on the NASDAQ in July.

Tilray closed its first day of trading at just over $22 a share, then began a steady rise. By the end of last week, it was hovering around $109. Then, on Tuesday, the company announced that the U.S. Drug Enforcement Agency had given it permission start exporting cannabis to the U.S. for medical research, making it the first Canadian firm to win that right. Its stock price began started going parabolic, and that night, the company’s CEO made on appearance on CNBC’s Mad Money, where he confidently told host Jim Cramer that cannabis would become a $100 billion industry. On Wednesday, the volatile stock hit a high of around $300 before starting to come down, and trading was halted multiple times. Then, Thursday, it fell 17 percent, to a still lofty $176 a share.

None of this is easy to justify based on Tilray’s actual business. The company currently loses money and generates little revenue—last quarter, it brought in just over $9 million. Meanwhile, the DEA only granted it the right to provide cannabis for a single clinical trial at U.C.–San Diego involving 16 patients. That’s good news for the industry as a whole, since it suggests the U.S. government is loosening its attitude on medical research—but it’s hard to say exactly what this coup means for Tilray in particular over the long-term. And it certainly doesn’t justify why, for a brief moment, it had a higher market capitalization than U.S. Airlines, CBS, or Clorox. “It’s insane. It makes no sense,” Alan Brochstein, a marijuana industry analyst and founder of New Cannabis Ventures, told me.

One reason the company’s stock has swung so wildly, Brochstein said, is that there just isn’t very much of it floating around. Most of Tilray’s shares are still owned by the Peter Thiel–backed private investment fund Privateer Holdings. So a large number of speculators have been scrambling to buy (or sell) the relatively small pool of outstanding securities. “It’s been hijacked by traders,” he said. Outlets like Bloomberg have speculated that some of the hijackers may be retail investors who made money on the crypto market, and are now looking for a new trend to chase.

In the end, Tilray is just the most extreme example of the froth foaming all over the marijuana sector; as Bill Alpert of Barron’s reported this week, “even the industry’s biggest bulls now acknowledge the bubbles floating all around them.” The index of global marijuana stocks that New Cannabis Ventures tracks has almost doubled in value this year, for instance, and it doesn’t yet include Tilray. It’s basically impossible to square those rising valuations with the money that any of these companies actually earn. I happen to have been attending a marijuana investor conference this week, where one prominent CEO told the crowd that valuations “don’t really matter.” He was talking about startups, rather than the likes of Tilray, but that’s classic bubble talk.

There are of course plenty of concrete reasons to be optimistic about the future of legal marijuana. For starters, Americans already spend lots of money on it, and will probably spend more in the future. The investor group Arcview forecasts that legal cannabis spending in the U.S. will total 

 (a bit more than what Major League Baseball 

 in revenue in 2017). California legalized recreational marijuana this year, opening up the world’s fifth-largest economy to more adult sales. Other major states like New York and New Jersey could soon follow, with each new corner of the country that embraces marijuana, Washington seems more likely to follow. Constellation brands, the wine and beer company that brews Corona in the U.S., has taken a 

 in Canopy Growth, another Canadian marijuana producer, which suggests the alcohol industry is going to make a push into THC-infused beverages. And this week, news broke that Coca Cola 

 cannabis-infused beverages (specifically, drinks made with CBD, a compound in marijuana that doesn’t get users high, but does have 

 and has already become a wellness trend). It’s not irrational to think of cannabis companies as growth stocks.

The problem is that while marijuana may be going mainstream—even corporate—it isn’t yet federally legal. And until it is—if it ever is—nobody really knows what the market will actually look like, or which companies will be able to thrive in it. Will cultivators be allowed to ship marijuana across state lines? Will brewers be able to sell their cannabeer in bars or at grocery stores, or just dispensaries? Will the pharmaceutical industry try to elbow its way in for a big piece of the profits? Will the weed ultimately be regulated more like an herbal supplement, or more like a prescription drug? Investors don’t have any answers to those sorts of questions, yet. Just high hopes.

Read more at Slate

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